The chart illustrates the harmonised unemployment rates for 28 economies in July spanning 2008-2010 (based on data availability, the comparison month is June for Chile, Netherlands, Norway and Turkey, and May for the UK). The countries are ranked by the percentage change in the unemployment rate from 2008 to 2010, where Denmark is the highest, 115% increase, and Germany is the lowest, -4.2%.

The story in this chart is obvious: the slack in global economic activity remains extreme in much of the developed world. More growth is needed, but apparently we’re not going to get it.

The OECD released its index of composite leading indicators (CLI, where you can view the components of the index for each country here) for July. The pace of economic expansion is waning. (Click on chart to enlarge.)

The CLI for the OECD area decreased by 0.1 point in July 2010. In Canada, France, Italy, the United Kingdom, China and India there are stronger signals of a slower pace of economic growth in the coming months than was anticipated in last month’s release. Stronger signals that the expansion may lose momentum have emerged in Japan, the United States and Brazil. Tentative signals have also emerged that the expansion phases of Germany and Russia may soon peak.

According to the composite CLI, the OECD hit a cyclical trough in May 2009 (14 months before the July release). Since then, the unemployment rate has risen in 20 of the 28 listed economies.

The robust global restocking of inventories fuelled world export income, but that cycle is now over (see the chart on page 8 of the OECD’s interim forecast). Furthermore, expansionary policy, which underpinned domestic demand around the world, is tightening.

Policy will turn expansionary again in several of these economies. The faltering sum of income will drag global growth further until stabilising policy kicks in.